A tense week, but markets have been tamed
KUALA LUMPUR: It was a tense week that followed the installation of a new government in Putrajaya, but the markets have been tamed, on the back of renewed confidence projected by investors.
An assurance from the Council of Eminent Persons (CEP) that they were going to address all problems affecting the economy and the speed at which it moved and acted to assist the Pakatan Harapan government fullfill its 100-day promises, also went down well with investors.
“There is no reason to put the economy in a state that is much worse (than before),” said Council member and former Finance Minister, Tun Daim Zainuddin, who evidently still commands respect from the markets.
Many had anxiously been waiting for Bursa Malaysia to open last Monday and to see how the ringgit would perform with a new government in place.
A new government always spells uncertainty, and true enough, the FTSE Bursa Malaysia KLCI (FBM KLCI) plunged 31.72 points in opening the week at 1,814.79 on Bursa Malaysia, before losing almost 50 points four minutes into trade.
The ringgit too succumbed to selling pressure and opened at 3.9850/9880 against the greenback from Tuesday’s close of 3.9480/9530.
However, both the stock market and the ringgit rebounded thereafter, with the benchmark index ending 3.91 points higher at 1,850.42, while the local currency shored back to the same level as the previous Tuesday, which also happened to be the day before the 14th General Election. At the close of this week’s trading, the FBM KLCI ended at 1,854.5 points, up 4.08 points from Monday’s close or 7.99 points from Tuesday last week, while the ringgit was quoted Friday at 3.9700/9740.
The ringgit had recovered from a rough ride before, having dipped to its lowest of 4.4930 on Jan 4, 2017, dampened by factors such as the 1Malaysia Development Bhd (1MDB) issue and tumbling oil prices.
Oil prices are currently hovering at US$80 per barrel, while the new government is coming to grips with matters concerning 1MDB.
The five-member CEP and Prime Minister Tun Dr Mahathir Mohamad, had worked tirelessly throughout the week to help restore the confidence of the people and investors in Malaysia’s economy.
Other than Daim, the CEP also includes former Bank Negara Malaysia (BNM) Governor Tan Sri Dr Zeti Akhtar Aziz, former Petronas president and chief executive officer, Tan Sri Mohd Hassan Marican, economist Prof Jomo Kwame Sundaram and tycoon Tan Sri Robert Kuok.
It had met 40 times as of Friday and since being established last Saturday.
The week also saw the release of former opposition leader, Datuk Seri Anwar Ibrahim and an announcement of the new Cabinet line-up.
Meanwhile, commenting on the ringgit, an academician said the local currency had actually strengthened compared to 4.3235 per US dollar, exactly a year ago on May 18.
Most importantly, its performance should reflect economic fundamentals in the medium to long term, said Putra Business School’s Business Development, Senior Lecturer and Manager, Dr. Ahmed Razman Abdul Latiff
He said, for example, the current account surplus had increased in the first quarter of 2018 to the highest level since the second quarter of 2014 at RM15 billion, equivalent to 4.5 per cent of gross national income (GNI), and this was in addition to export growth remaining on an above-average trend.
“All these will lead to a strengthening ringgit in the near future, especially when there is greater clarity over domestic policy reforms and favourable domestic macroeconomic activities and increasing oil prices,” he told Bernama via email.
As for the stock market, Ahmed Razman said many are predicting that the FBM KLCI would hit more than 1,900 points by year-end, once the new government starts to settle down and finalise its monetary reforms.
“Abolishment of the Goods and Services Tax (GST) might improve consumer demand and spur growth activity of businesses. — Bernama